What to Expect From AvalonBay Communities in Q3 Earnings?

AvalonBay Communities, Inc. AVB, a leading real estate investment trust (REIT) specializing in the development, acquisition and management of multifamily properties, is set to announce its third-quarter 2024 results after the closing bell on Nov. 4.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the last reported quarter, this residential REIT delivered a surprise of 2.21% in terms of core funds from operations (FFO) per share. The quarterly results reflected a year-over-year increase in same-store total revenues.Over the last four quarters, AvalonBay surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.40%. The graph below depicts the surprise history of the company:AvalonBay Communities, Inc. Price and EPS Surprise AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. QuoteAs we approach the release of AvalonBay's third-quarter 2024 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.US Apartment Market in Q3Per RealPage data, the U.S. apartment demand remained impressive in the third quarter of 2024 despite a record number of new deliveries entering the market. As a result, rent growth stayed relatively subdued across the nation, continuing the trend observed over the past several months.Between July and September 2024, the U.S. apartment market absorbed 192,649 market-rate units, while 162,595 new units were delivered during the same period. Annual supply hit 557,842 units, the highest since 1974, while demand trailed slightly at 488,773 units.In the third quarter, nationwide, occupancy in market-rate apartments stood at 94.4%, a slight decline of just 10 basis points compared to last year. Rents rose 0.2% year over year in September, and the monthly effective rent change was down 0.5%. The average effective rent was $1,838.Factors to Consider Ahead of AVB’s Q3 ResultsAvalonBay’s strategy of developing, acquiring and redeveloping multifamily properties in high-growth areas has proven effective over the years. By focusing on premium apartment communities in desirable neighborhoods, AVB sustains strong occupancy and commands higher rents.The company leverages technology, scale and organizational strengths to foster innovation and enhance margins across its portfolio. Its commitment to long-term value creation and risk management supports stable financial performance and consistent cash flow, helping maintain balance sheet strength.However, in the third quarter, AvalonBay is likely to have continued to face challenges attracting renters due to high supply levels in certain markets. Competition from other housing options, like rental apartments, condominiums and single-family homes, limits its rent-raising ability, constraining its growth momentum to some degree.Also, a high interest rate is a concern for AvalonBay. Elevated rates imply higher borrowing costs for the company, which is likely to have affected its ability to purchase or develop real estate.Projections for AVBAvalonBay’s third-quarter 2024 operating update, published on Sept. 4, highlights witnessing stable economic occupancy in the mid-95% range and turnover below historical levels. Also, the company noted that like-term effective rent change remained healthy with suburban exceeding urban.In August, economic occupancy for its same-store residential portfolio was 95.6%, up from 95.5% in July. The like-term effective rent change for same-store residential was 3.5% in August compared with 3.6% in July.The like-term effective rent change for the company’s suburban communities was 3.6% in both August and July. In the case of urban communities, the like-term effective rent change was 3.3% in August compared with 3.5% in July.We project economic occupancy of 95.9% in the quarter, while same-store average rental rates are projected to increase 0.5% year over year. We expect interest expenses to increase 19% year over year in the third quarter.The Zacks Consensus Estimate of $731.67 million for third-quarter revenues suggests a 4.9% year-over-year increase.For the third quarter of 2024, AvalonBay expects core FFO per share in the range of $2.66-$2.76.Before the third-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has remained unrevised at $2.71 over the past three months. This suggests year-over-year growth of 1.9%.Here is What Our Quantitative Model Predicts for AVB:Our proven model predicts a surprise in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.AvalonBay currently carries a Zacks Rank of 2 and has an Earnings ESP of +0.72%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Other Stocks That Warrant a LookHere are two other stocks from the broader REIT sector — Simon Property Group SPG and Ryman Hospitality Properties RHP — that you may want to consider, as our model shows that these, too, have the right combination of elements to report a surprise this quarter.Simon Property, slated to release quarterly numbers on Nov. 1, has an Earnings ESP of +1.33% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Ryman Hospitality, scheduled to report quarterly numbers on Nov. 4, has an Earnings ESP of +1.23% and carries a Zacks Rank of 3.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AvalonBay Communities, Inc. (AVB): Free Stock Analysis Report Simon Property Group, Inc. (SPG): Free Stock Analysis Report Ryman Hospitality Properties, Inc. (RHP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks